Huntsman Announces Second Quarter Results; Reports Attractive MDI Margin Growth, Improving Sequential TiO2 Prices and Substantial Improvement in Cash Generation
FOR IMMEDIATE RELEASE
July 27, 2016
The Woodlands, Texas
Second Quarter 2016 Highlights
•Net income was $94 million compared to $39 million in the prior year period and $62 million in the prior quarter.
•Adjusted EBITDA was $325 million compared to $385 million in the prior year period and $274 million in the prior quarter.
•Diluted income per share was $0.36 compared to $0.12 in the prior year period and $0.24 in the prior quarter.
•Adjusted diluted income per share was $0.53 compared to $0.63 in the prior year period and $0.37 in the prior quarter.
•Net cash provided by operating activities was $355 million. Free cash flow generation was $282 million; we subsequently made a $100 million early repayment of debt in July 2016.
THE WOODLANDS, Texas – Huntsman Corporation (NYSE: HUN) today reported second quarter 2016 results with revenues of $2,544 million, net income of $94 million and adjusted EBITDA of $325 million.
Peter R. Huntsman, our President and CEO, commented:
“Our management team is focused on three primary strategic financial objectives. 1) Generating more than $350 million of free cash flow in 2016. 2) Growing margins and earnings in our downstream differentiated businesses. 3) Separating our TiO2 business through either a strategic combination or a spin-off.
“Our second quarter results demonstrate our commitment to these objectives. I am delighted we generated $282 million of free cash flow during the quarter, in part due to our increased focus on inventory management and are on plan to exceed our $350 million target. This enabled us to make a $100 million early repayment of debt in July. Our MDI margins are expanding, our Performance Products margins are healthy and our Advanced Materials business is maintaining strong margins. We are actively working toward a separation of our TiO2 business with a target of year-end or first quarter 2017. TiO2 selling prices are rising and other business conditions are improving for our Pigments and Additives business. In time, it should be well positioned for our planned separation. We will provide more information regarding the separation on our second quarter earnings conference call.
“I am encouraged by our second quarter results. We are well on track to successfully accomplish our objectives.”
Segment Analysis for 2Q16 Compared to 2Q15
The decrease in revenues in our Polyurethanes division for the three months ended June 30, 2016 compared to the same period in 2015 was primarily due to lower average selling prices partially offset by higher sales volumes. MDI average selling prices decreased in response to lower raw material costs. MTBE average selling prices decreased primarily as a result of lower pricing for high octane gasoline. MDI sales volumes increased due to higher demand in the Americas and European regions. PO/MTBE sales volumes increased due to the impact of the prior year planned maintenance outage. The increase in adjusted EBITDA was primarily due to the impact of the prior year planned PO/MTBE maintenance outage, estimated at $30 million, as well as higher MDI margins and sales volumes, partially offset by lower MTBE margins.
The decrease in revenues in our Performance Products division for the three months ended June 30, 2016 compared to the same period in 2015 was due to lower average selling prices and lower sales volumes. Average selling prices decreased primarily in response to lower
raw material costs and competitive market conditions. Sales volumes decreased primarily due to softer demand in China and oilfield applications as well as competitive market conditions. The decrease in adjusted EBITDA was primarily due to lower margins in our amines, maleic anhydride and upstream intermediates businesses.
The decrease in revenues in our Advanced Materials division for the three months ended June 30, 2016 compared to the same period in 2015 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily due to soft demand for low value business in our coatings and construction market, partially offset by growth in our aerospace market across all regions. Average selling prices decreased in our Asia Pacific region primarily as a result of competitive pressure in our electrical and wind markets, partially offset by higher average selling prices in our European and Americas regions. Adjusted EBITDA was unchanged as higher contribution margins from lower raw material costs were offset by lower sales volumes.
The decrease in revenues in our Textile Effects division for the three months ended June 30, 2016 compared to the same period in 2015 was due to lower average selling prices partially offset by higher sales volumes. Average selling prices decreased primarily due to lower raw material costs. Sales volumes increased in key target countries such as Bangladesh and India. The increase in adjusted EBITDA was primarily due to higher contribution margins from lower raw material costs.
Pigments and Additives
The decrease in revenues in our Pigments and Additives division for the three months ended June 30, 2016 compared to the same period in 2015 was due to lower average selling prices, partially offset by higher sales volumes. Average selling prices decreased primarily as a result of competitive pressure however th
ey increased compared to the prior quarter. Sales volumes increased primarily due to increased end use demand. The decrease in adjusted EBITDA was primarily due to lower contribution margins for titanium dioxide.
Corporate, LIFO and Other
Adjusted EBITDA from Corporate, LIFO and Other decreased by $14 million to a loss of $45 million for the three months ended June 30, 2016 compared to a loss of $31 million for the same period in 2015. The decrease in adjusted EBITDA was primarily the result of a decrease in LIFO inventory valuation income and a decrease in income from benzene sales.
Liquidity, Capital Resources and Outstanding Debt
As of June 30, 2016, we had $1,213 million of combined cash and unused borrowing capacity compared to $1,023 million on December 31, 2015.
On April 1, 2016, we entered into a new $550 million 2016 term loan B due 2023. Proceeds from the new term loan were used to repay in full our term loan B due 2017 and remaining term loan C due 2016. We also extended the maturity of our revolving credit facility to 2021 and increased the amount to $650 million.
On July 22, 2016, we made a $100 million early repayment of debt on our term loan B due 2019. We expect to record less than $1 million in early extinguishment of debt costs in the third quarter 2016.
Total capital expenditures for the three months and six months ended June 30, 2016 were $90 million and $189 million, respectively. As part of our completed ethylene oxide expansion in Port Neches, Texas, we received $26 million of capital reimbursement during the second quarter of 2016 from our customer with whom we have a multi-year offtake agreement. We expect to spend approximately $450 million annually on capital expenditures in 2016 and 2017.
We expect our 2016 depreciation and amortization to be approximately $430 million.
During the three months ended June
30, 2016, we recorded an income tax expense of $32 million. During the same period we paid $16 million in cash for income taxes.
We expect our 2016 adjusted effective tax rate to be approximately 25 – 30%. Our MTBE earnings are taxed at the U.S. statutory rate of 35%, variability in our MTBE earnings will have a meaningful impact on where our adjusted tax rate will be within that range. We expect our long term adjusted effective tax rate to be approximately 30%.
Earnings Conference Call Information
We will hold a conference call to discuss our second quarter 2016 financial results on Wednesday, July 27, 2016 at 11 a.m. ET.
- Call-in numbers for the conference call:
U.S. participants (888) 713 - 4218
International participants (617) 213 - 4870
Passcode 478 152 79#
In order to facilitate the registration process, you may use the following link to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. You may pre-register at any time, including up to and after the call start time. To pre-register, please go to: https://www.theconferencingservice.com/prereg/key.process?key=PMUG7QP3W
The conference call will be available via webcast and can be accessed from the company’s website at ir.huntsman.com.
The conference call will be available for replay beginning July 27, 2016 and ending August 3, 2016.
- Call-in numbers for the replay:
U.S. participants (888) 286 - 8010
International participants (617) 801 - 6888
Replay code 27138577
During the third quarter a member of management will present at the Jefferies Industrials Conference, August 10, 2016. A webcast of the presentation, if applicable, along with accompanying materials will be available at ir.huntsman.com
For more information about Huntsman's second quarter 2016 results, click here.
Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated chemicals with 2015 revenues of more than $10 billion. Our chemical products number in the thousands and are sold worldwide to manufacturers serving a broad and diverse range of consumer and industrial end markets. We operate more than 100 manufacturing and R&D facilities in approximately 30 countries and employ approximately 15,000 associates within our 5 distinct business divisions. For more information about Huntsman, please visit the company's website at www.huntsman.com.
Statements in this release that are not historical are forward-looking statements. These statements are based on management's current beliefs and expectations. The forward-looking statements in this release are
subject to uncertainty and changes in circumstances and involve risks and uncertainties that may affect the company's operations, markets, products, services, prices and other factors as discussed in the Huntsman companies' filings with the U.S. Securities and Exchange Commission. Significant risks and uncertainties may relate to, but are not limited to, financial, economic, competitive, environmental, political, legal, regulatory and technological factors. The company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by applicable laws.